Emerging markets generally have youthful, digital-savvy populations, and in many cases their needs aren’t being met, so there is a lot of opportunity for new players to come in and innovate.
In India, for example, there are about 800 million people under age 35. As investors, that creates opportunities not only in technology companies, but also in areas like financial services and aspirational products like education and luxury goods. We are excited about what the future will bring.
The numbers, the demographics, the size and scale of the opportunity. It's very difficult to see a similar opportunity almost anywhere else.
Chief Investment Officer - Emerging Markets Equity
The pandemic period has catalysed change, innovation, and brought a greater focus on technology.
That means we're going to see a lot more growth and this growth is going to happen faster and sooner.
And these opportunities are being realised and monetised on the ground in places like Asia and Latin America and across emerging markets.
Under 35s in India – that’s 2½ times the entire population of the United States1.
This offers companies immense growth potential.
Growth in battery demand2 over next 5 years.
Asia is also the home to the leading battery producers.
Retail internet penetration2 in Brazil. That’s half the level of the US and one-third of the UK and China. That’s an important distinction.
Digitally facilitated loans will more than quadruple2.
This is an investment opportunity that also accelerates wider economic growth.
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Manraj Sekhon
What's really interesting is that the opportunities we're seeing today at are very different from the opportunities 20 years ago.
Yi Ping Liau
The circumstances are extremely fertile for growth.
Manraj Sekhon
The numbers, the demographics, the size and scale of the opportunity. It's very difficult to see a similar opportunity almost anywhere else.
Yi Ping Liau
We think that the inflection point is now.
Manraj Sekhon
The events of the last 18 months have helped to accelerate, uh, the needs of consumers and the ability of businesses to deliver utilising technology, utilising lots of different platforms, whether it's in eCommerce, whether it's in digital banking, whether it's in clean energy. So companies that were positioned well for the future have found their business models have gone forward in two years, what they expected to happen in five to 10 years.
What it is about is companies reacting to the needs of consumers, companies that do not have sunk capital in legacy business models, companies that are able to utilise technology innovation, to leapfrog traditional business models, to deliver what consumers want. What's fascinating about what's happening right now is, is the change is not concentrated in the traditional areas like technology - it's happening in a whole range of areas.
What's fascinating about what's happening right now is, is the change is not concentrated in the traditional areas like technology happening in a whole range of areas.
If you are looking for a long-term investment that harnesses this dynamic growth potential consider Templeton Emerging Markets Investment Trust.
(Source: IMF WEO, October 2021)
Leslie Chow
Today. One of the biggest themes that we're seeing out here in Asia is the mobility and the electrification of the transportation sector.
You've got the, the technology leadership, the producers here have been making these batteries for other applications for a good part of the last two decades.
Asia is also the home to the leading battery producers. It has an extensive supply chain going from battery components, raw materials, intermediates all the way through. We expect these Asian companies to maintain their leadership and push for the global penetration of electric vehicles.
The battery capacity that's ex oh, sorry. What was that?
Video Producer
Battery?
Leslie Chow
Sorry. We're having battery problems.
Elizabeth Wu
The Asian Pacific region harbours the world’s second largest pharmaceutical market, China, which has drug sales of 230 billion US dollars by 2020.
And it will register a growth of 5- 6% for the next few years. Chinese bio tech is no longer pure fast follower. Actually, they're striving to be on par with their global peers.
Marcos Mundim
One key area that we are excited about is retail. We see online retail as a big opportunity for retailers in Latin Americans, specifically in Brazil, which is the biggest market.
Yeah. Sorry. Sorry about that.
Video Producer:
That's right. No worries.
Yi Ping Liao
You put together young digital savvy population with the fact that their needs are not being met. And, I think, what this means is there is a lot of opportunity for new players to come in and innovate.
Manraj Sekhon
The scale again is very different from what we've seen in other parts of the world. If you look at Southeast Asia, it's a population of 600 million people. If you look at India, just the population under 35 is about 800 million people. These are digital natives that are finding opportunities to access technology opportunities, to access financial services, opportunities, to access aspirational products like education and luxury goods in a way that we've never seen before.
Leslie Chow
Battery capacity today is about 0.2 terawatt hours. And we're expecting that to grow to seven terawatt hours by 2030 - that would involve almost half a trillion US dollars of investment.
Elizabeth Wu
In terms of penetration rate the biologics drugs in China only accounts for less than 20%. Whereas in developed countries in US, the penetration rate is around 44%.
Marcos Mundim
The penetration of online retail in Brazil is 10%. That's half of what the penetration is in the US. And a third of what penetration is in China and the UK.
Yi Ping Liau
You can see the very rapid growth of internet users in the region and how quickly that's changed. In 2015, we had 250 million people using the internet. This has grown to over 400 million by the end of 2020.
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Manraj Sekhon
When we look back at this period, I think what we're going to see is actually a phase because of what happened with the pandemic it's catalyzed change. It's catalyzed innovation, a greater focus on technology and the scalability of the technology opportunity in a way that means we're going to see a lot more growth and this growth is going to happen faster and sooner. And these opportunities are happening today on the ground in places like Asia and Latin America.
Leslie Chow
Demand for electric vehicles is growing at a 25% compound annual growth rates over the next five years. We're actually seeing batteries grow in excess of more like 35%, 40% over the over that period.
Elizabeth Wu
In China, the biotech industry is about 60 billion US dollars by the end of 2020. According to our projection, this market will be more than doubled to reach 128 billion US dollars by year 2025.
Marcos Mundim
The companies here have the advantage of looking outside, mainly into the developed markets and seeing what has worked there. So, they can kind of leapfrog to the winning solutions that were adopted in those markets.
Yi Ping Liau
We think that the FinTech opportunity is attractive because firstly, we're seeing very rapid growth from a low base. We think that digital transactions will more than double by 2025. We think that digitally facilitated loans will more than quadruple.
Video Producers
Five. Great.
Elizabeth Wu
Is that ok? Yay!
Video Producers
Okay? Fantastic. Yeah.
Manraj Sekhon
We at Franklin Templeton have been looking at emerging markets for over 30 years. I think it's a very interesting time to be looking at the emerging world today. The breadth of opportunity, the growth that we're seeing, the innovation, the sustainability of the business models, the much stronger institutional resilience. When you put that all together, I think the future is looking very, very attractive for emerging markets.
Footnotes
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This website is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares of the Templeton Emerging Markets Investment Trust (TEMIT). Nothing in this website should be construed as investment advice. Opinions expressed are the author's at publication date and they are subject to change without prior notice. Subscriptions to TEMIT can only be made on the basis of the latest available audited TEMIT annual report and TEMIT half-yearly report if published thereafter.
The value of shares in TEMIT and income received from it can go down as well as up, and investors may not get back the full amount invested. Past performance is not an indicator or a guarantee of future performance. Currency fluctuations may affect the value of overseas investments. When investing in a fund denominated in a foreign currency, your performance may also be affected by currency fluctuations. An investment in TEMIT entails risks which are described in the TEMIT annual report. In emerging markets, the risks can be greater than in developed markets. Investments in derivative instruments entail specific risks more fully described in the TEMIT annual report.
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